Realtors seek clarity on GST exemption on development rights

Realtors’ body, NAREDCO, has written to the Ministry of Housing and Urban Affairs seeking clarity on this.

Mumbai: Realty developers are seeking clarity on recent exemption offered from the goods & services tax (GST) levied on development rights, including transferable development rights (TDRs), development rights certificates (DRCs) and joint development agreements (JDAs).

Realtors’ body, the National Real Estate Development Council (NAREDCO), has written to the Ministry of Housing and Urban Affairs seeking clarity on this.

Last Sunday, the GST Council proposed that intermediate tax on development rights will be exempted only for such residential projects on which GST is payable.

The government decided to more than halve the GST rates for under-construction projects to 5% from 12%. The GST Council removed the input tax credit, while GST on affordable housing was reduced to a marginal 1% along with expanding definition of such homes. Ready properties that have received occupancy certificate (OC) do not attract GST.

“What if some units are being sold after the project is completed? Being a completed project that has already received occupation certificate, it will not attract GST. Will the JDA or TDRs used in this project still attract intermediate tax? We need to get clarity on this,” said Niranjan Hiranandani, national president, NARDECO.

The ministry has already announced that details of this scheme will be worked out by an officers committee and will be approved by the GST Council in a meeting to be called specifically for this purpose soon.

As the details of the scheme are yet to be worked out by an officers’ committee, the developers’ body has sought to make a representation to avoid confusions or litigations later on. NAREDCO is of the view that the condition to be fulfilled to receive the tax exemption — “only for such residential projects on which GST is payable” — may lead to litigations.

In its letter to the ministry earlier this week, the developers’ body has cited instances that can lead to confusion and litigations. These examples include that of a residential project with convenience and retail shops, smart and integrated townships tagged as mixed-use development, and sale of residential units post completion of the project.

The NAREDCO representation is that the wording should be: “Tax on development rights, such as TDR/ JDA, long-term lease (premium), FSI shall be exempted”. Effectively, there should be no levying of ‘intermediate tax’ and the exemption should not be restricted to just ‘residential property’, but to all segments and types of property including commercial.